Differential Analysis for a Discontinued Product

The condensed product-line income statement for Dish N Dat Company for the month of March is as follows:

Dish N Dat Company Product-Line Income Statement For the Month Ended March 31
	Bowls			Plates			Cups
Sales	$64,800			$89,700			$27,400
Cost of goods sold	26,500			32,700			14,600
Gross profit	$38,300			$57,000			$12,800
Selling and administrative expenses	29,900			35,500			15,500
Income from operations	$8,400			$21,500			$(2,700)

Fixed costs are 13% of the cost of goods sold and 36% of the selling and administrative expenses. Dish N Dat assumes that fixed costs would not be materially affected if the Cups line were discontinued.

a. Prepare a differential analysis dated March 31 to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate a loss.

Differential Analysis
Continue Cups (Alt. 1) or Discontinue Cups (Alt. 2)
March 31
	Continue Cups (Alternative 1)	Discontinue Cups (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$	$	$
Costs:
Variable cost of goods sold
Variable selling and admin. expenses
Fixed costs
Income (Loss)	$	$	$

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b. Should the Cups line be retained? Yes

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